Administration warns payment system may stall

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WASHINGTON - Medicare’s payment system, the unseen but vital network that handles 100 million monthly claims, could freeze up if President Obama’s health care law is summarily overturned, the administration has quietly informed the courts.

Although Obama’s overhaul made significant cuts to providers and improved prescription and preventive benefits, Medicare was overlooked in Supreme Court arguments that focused on the law’s controversial requirement that individuals carry health insurance.

In papers filed with the Supreme Court, administration lawyers have warned of “extraordinary disruption’’ if Medicare is forced to unwind countless transactions that are based on payment changes required by more than 20 separate sections of the Affordable Care Act.

Opponents say the whole law must go. The administration counters that even if it strikes down the insurance mandate, the court should preserve most of the rest of the legislation. That would leave in place its changes to Medicare as well as a major expansion of Medicaid coverage.

Last year, in a lower court filing on the case, Justice Department lawyers said reversing the Medicare payment changes “would impose staggering administrative burdens’’ on the government and “could cause major delays and errors’’ in claims payment.

Former program administrators disagree on the potential for major disruptions, while some private industry executives predict an avalanche of litigation unless Congress intervenes.

Medicare payment policies are set through a time-consuming process that begins with legislation passed by Congress. Even if the law were completely overturned, the government still would have authority under previous legislation to pay hospitals, doctors, insurance plans, nursing homes, and other providers.

“There is an independent legal basis to pay providers if the Supreme Court strikes down the entire law,’’ said Thomas Barker, a former Health and Human Services general counsel in the George W. Bush administration.

But reversing the new law’s payment changes from one day to the next would be a huge legal and logistical challenge, raising many questions. How would Medicare treat payments made over the last two years, when the overhaul has been the law of the land? Would providers who have received cuts subsequently have a right to refunds?

“Medicare cannot turn on a dime,’’ said former administrator Don Berwick, Obama’s first Medicare chief. “I would not be surprised if there are delays and problems with payment flow. Medicare has dealt with sudden changes in payment before, but it is not easy.’’

It’s not just reimbursement levels that would get scrambled, Berwick said. The law’s new philosophy of paying hospitals and doctors for quality results, rather than for sheer volume of tests and procedures, has been incorporated in some payment policies.

Tom Scully, who ran Medicare during Bush’s first term, does not foresee major problems, although he acknowledges it would be a “nightmare’’ for agency bureaucrats.

“It is highly unlikely in the short term that any health plan or provider would suffer,’’ said Scully. “They’re probably likely to get paid more going forward. If you look at the way the law was [financed], it was a combination of higher taxes and lower [Medicare] payments. That’s what you would be rolling back.’’

The White House declined to comment.

‘I would not be surprised if there are delays and problems.’

Don Berwick, Former Obama official

Administration officials say they are confident the entire law will be upheld by the Supreme Court, and there’s no contingency plan to address whether all or parts of it are struck down. Sharp questioning by the court’s conservative justices during public arguments has led many to speculate that at least some parts of the law will be struck down.

Opponents of the law argue that Congress overstepped its constitutional authority by requiring most Americans to have health insurance, starting in 2014. The administration says the mandate is permissible because it serves to regulate interstate commerce, underpinning another provision of the law that requires insurance companies to accept people in poor health. A decision is expected by summer.

Former officials say it’s likely that some form of high-level assessment and planning is going on within the administration. It has happened in the recent past.

Last year, when the GOP-led House threatened to block funding for carrying out Obama’s law, Health and Human Services Secretary Kathleen Sebelius wrote to Congress outlining potential consequences.

She said the administration might have to suspend payments to Medicare Advantage plans, popular private insurance alternatives that cover about one-fourth of all beneficiaries. That would have sent millions of seniors back into traditional Medicare, scrambling to find new doctors and coping with higher out-of-pocket costs.

Scully dismissed the notion that private Medicare plans would be jeopardized if the Supreme Court throws out the law.

“The idea that Medicare Advantage plans would shut down and patients would be thrown into the street is just people making up arguments to stir the pot,’’ he said.

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